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Equity style timing : a multi-style rotation model for the Russell large-cap and small-cap growth and value style indexes

Title:

Equity style timing : a multi-style rotation model for the Russell large-cap and small-cap growth and value style indexes

Panju, Karim (2003) Equity style timing : a multi-style rotation model for the Russell large-cap and small-cap growth and value style indexes. Masters thesis, Concordia University.

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Abstract

In their search for "excess returns", investors have always considered timing strategies to be potential value-enhancement tools. While transaction costs in the past have often rendered such strategies unprofitable, we can expect the ongoing decline in these costs to be accompanied by a proliferation of timing strategies by investors. Therefore, being able to time the market accurately has significant implications for researchers and practitioners alike. In this paper, we develop a timing model based on macroeconomic and fundamental public information using Frank Russell large-cap and small-cap style indexes. Despite the fact that there exists an extensive literature on equity style timing, our study differs from other studies in that it attempts to time four different markets segments simultaneously and use a multinomial logit approach as opposed to the more common binary logit approach. The results show that the terminal wealth for the portfolio generated by our model is more than two times larger than the terminal wealth of the best performing buy-and-hold portfolio, suggesting that significant opportunities for "excess returns" can be exploited by implementing a multi-style rotation strategy that employs the investment recommendations of our model. Additional finding shows that the profitability of pursuing such strategy remains in the presence of reasonable levels of transaction costs.

Divisions:Concordia University > John Molson School of Business
Item Type:Thesis (Masters)
Authors:Panju, Karim
Pagination:ix, 67 leaves ; 29 cm.
Institution:Concordia University
Degree Name:Theses (M.Sc.Admin)
Program:John Molson School of Business
Date:2003
Thesis Supervisor(s):Switzer, Lorne
ID Code:2418
Deposited By:Concordia University Libraries
Deposited On:27 Aug 2009 13:28
Last Modified:14 Dec 2012 16:36
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